28. Pension and Other Post-Retirement Benefits

Cameco maintains both defined benefit and defined contribution plans providing pension and post-retirement benefits to substantially all of its employees.

Under the defined pension benefit plans, Cameco provides benefits to retirees based on their length of service and final average earnings. The non-pension post-retirement plan covers such benefits as group life and supplemental health insurance to eligible employees and their dependants. The costs related to the non-pension post-retirement plans are charged to earnings in the period during which the employment services are rendered. However, these future obligations are not funded.

The effective date for the most recent valuations for funding purposes on the pension benefit plans is January 1, 2009. The next planned effective date for valuation for funding purposes of the pension benefit plans is set to be January 1, 2012.

A reconciliation of the funded status of the benefit plans to the financial statements is as follows:

The actual return on plan assets for the pension benefit plans for the year ended December 31, 2011 was $318,400 (2010 - $3,739,300).

The percentages of the total fair value of assets in the pension plans for each asset category at December 31 were as follows:

Pension Benefit Plans

2011

2010

(i) The defined benefit plan assets contain no material amounts of related party assets at December 31, 2011 and 2010 respectively.

(ii) Relates to the value of the refundable tax account held by the Canada Revenue Agency. The refundable total is approximately equal to half of the sum of the realized investment income plus employer contributions less half of the benefits paid by the plan.

The following represents the components of net pension and other benefit expense included primarily as part of administration expense:

Pension Benefit Plans

Other Benefit Plans

2011

2010

2011

2010

Current service cost

$1,283

$1,330

$727

$880

Interest cost

1,948

1,905

747

1,057

Expected return on plan assets

(880)

(778)

–

–

Past service cost

–

–

117

–

Defined benefit pension expense

2,351

2,457

1,591

1,937

Defined contribution pension expense

16,663

13,921

–

–

Net pension and other benefit expense

$19,014

$16,378

$1,591

$1,937

The assumptions used to determine the Company's defined benefit obligation and net pension and other benefit expense were as follows at December 31:

Pension Benefit Plans

Other Benefit Plans

2011

2010

2011

2010

Discount rate

4.5%

5.5%

4.5%

5.5%

Rate of compensation increase

4.0%

4.5%

–

–

Long-term rate of return on assets

5.9%

5.9%

–

–

Health care cost trend rate

–

–

9.0%

9.0%

The long-term rate of return on assets has been determined using an asset model that takes into account the allocation of assets among various asset classes, the expected rate of return on each asset class, the variability of returns and the correlation of returns among asset classes.

An increase of one percent in the assumed health care cost trend rate would increase the aggregate of the current service cost and interest cost components of other benefit expense by $23,100 and increase the defined benefit obligation for these plans by $261,000. A decrease of one percent in the assumed health care cost trend rate would decrease the aggregate of the current service cost and interest cost components of other benefit expense by $30,800 and decrease the defined benefit obligation for these plans by $316,800.

The total amount of actuarial losses recognized in other comprehensive income is:

Pension Benefit Plans

Other Benefit Plans

2011

2010

2011

2010

Balance at beginning of year

$574

$

–

$

–

$

–

Recognized during the year

13,496

574

1,803

–

$14,070

$574

$1,803

$

–

The following table presents historical information on both the pension and other benefit plans:

Pension Benefit Plans

Other Benefit Plans

2011

2010

2011

2010

Fair value of plan assets

$21,766

$27,135

$

–

$

–

Present value of defined benefit obligation

44,111

35,518

16,276

13,355

Deficit in the plan

$(22,345)

$(8,383)

$(16,276)

$(13,355)

Experience adjustments arising on plan assets

(2.6)%

10.9%

–

–

Experience adjustments arising on plan liabilities

29.3%

10.0%

11.1%

–

The following are the contributions expected to be paid to the plans during the annual period beginning after the end of the current reporting period:

2012

Employer contribution to funded pension plans

$11,898

Benefits paid for unfunded benefit plans

788

Cash contributions to defined contribution plans

17,329

BPLP

BPLP has a funded registered pension plan and an unfunded supplemental pension plan. The funded plan is a contributory, defined benefit plan covering all employees up to the limits imposed by the Income Tax Act. The supplemental pension plan is a non-contributory, defined benefit plan covering all employees with respect to benefits that exceed the limits under the Income Tax Act. These plans are based on years of service and final average salary.

BPLP also has other post-retirement benefit and other post-employment benefit plans that provide for group life insurance, health care and long-term disability benefits. These plans are non-contributory.

The effective date for the most recent valuations for funding purposes on the pension benefit plans is January 1, 2011. The next planned effective date for valuation for funding purposes of the pension benefit plans is set to be January 1, 2012. The status of Cameco's proportionate share (31.6%) of the defined plans is as follows:

A reconciliation of the funded status of the benefit plans to the financial statements is as follows:

The assets of the pension plan are managed on a going concern basis subject to legislative restrictions. The plan's investment policy is to maximize returns within an acceptable risk tolerance. Pension assets are invested in a diversified manner with consideration given to the demographics of the plan participants.

The following represents the components of net pension and other benefit expense included primarily as part of cost of products and services sold:

Pension Benefit Plans

Other Benefit Plans

2011

2010

2011

2010

Current service cost

$26,752

$18,329

$9,312

$7,422

Interest cost

47,122

42,478

9,424

8,960

Expected return on plan assets

(50,484)

(44,490)

–

–

Past service cost

–

–

450

450

Net pension and other benefit expense

$23,390

$16,317

$19,186

$16,832

The assumptions used to determine BPLP's defined benefit obligation and net pension and other benefit expense related to the pension benefit and other benefit plans were as follows:

Pension Benefit Plans

Other Benefit Plans

2011

2010

2011

2010

Discount rate

4.8%

5.3%

4.6%

5.1%

Rate of compensation increase

3.5%

3.5%

3.5%

3.5%

Long–term rate of return on assets

7.0%

7.0%

–

–

Initial health care cost trend rate

–

–

8.5%

9.5%

Cost trend rate declines to

–

–

5.0%

5.0%

Year the rate reaches its final level

–

–

2019

2019

The overall expected rate of return is a weighted average of the expected returns of the various categories of plan assets held. The assessment of the expected returns is based on historical return trends with reference to market interest rates at the measurement date on high-quality debt instruments with cash flows that match the timing and amount of expected future benefit payments.

An increase of one percent in the assumed health care cost trend rate would increase the aggregate of the current service cost and interest cost components of other benefit expense by $3,661,000 and increase the defined benefit obligation for these plans by $35,363,000. A decrease of one percent in the assumed health care cost trend rate would decrease the aggregate of the current service cost and interest cost components of other benefit expense by $2,736,000 and decrease the defined benefit obligation for these plans by $27,554,000.

The total amount of actuarial losses recognized in other comprehensive income is:

Pension Benefit Plans

Other Benefit Plans

2011

2010

2011

2010

Balance at beginning of year

$127,451

$

–

$17,291

$

–

Recognized during the year

107,364

127,451

16,029

17,291

$234,815

$127,451

$33,320

$17,291

The following table presents historical information on both the pension and other benefit plans:

Pension Benefit Plans

Other Benefit Plans

2011

2010

2011

2010

Fair value of plan assets

$758,652

$717,320

$

–

$

–

Present value of defined benefit obligation

1,017,453

887,419

211,093

181,011

Deficit in the plan

$(258,801)

$(170,099)

$(211,093)

$(181,011)

Experience adjustments arising on plan assets

(3.5)%

1.6%

–

–

Experience adjustments arising on plan liabilities

8.0%

15.7%

7.6%

9.6%

The following are the contributions expected to be paid to the plans during the annual period beginning after the end of the current reporting period: